Transparency is the order of the day. We already have a
public register of people who own or control UK companies and in 2021 there
will be a public register of owners/controllers of non-UK companies which hold
UK real estate.
The government says this is all to do with combating money
laundering and terrorist financing. But it is also about making sure that
people pay their tax liabilities.
When it comes to transparency, trusts are no exception. The
EU already requires member states to maintain a central register of taxable
trusts. However, the government has released a consultation on the
implementation of the EU’s Fifth Money Laundering Directive which significantly
extends the transparency requirements for trusts.
All EU
trusts will have to be registered and not just those trusts which are taxable.
This could include, for example, trusts which just hold a life policy and are
therefore effectively dormant until somebody dies and may even include simple
joint ownership of real estate.
Some non-EU
trusts will have to register if they own UK real estate or engage advisers or
other service providers (such as banks or investment managers) in the UK.
The
information on the register will be available to anybody who has a ‘legitimate
interest’. This could include investigative journalists with a track record in
uncovering wrongdoing but only where they have some evidence to support their
suspicions.
If a
trust which is on the register owns more than 25% of a non-EU company, the
information about the trust will be accessible to any member of the public
whether or not they have a ‘legitimate interest’.
There is still some time to get ready for this. The new
rules will only apply from January 2020 and existing trusts will have until the
end of March 2021 to register.
Going forward however, new trusts will only have 30 days to
register and any changes to the registered information will need to be notified
to HMRC within 30 days of the change.
HMRC’s existing trust registration has been plagued with
technical difficulties. Let’s hope that these have been sorted out by the time
the new rules come into force.
At the moment, it is only EU member states who are required
to keep a trusts register. However, as can be seen, these changes will also
impact some non-EU trusts which have EU connections.
Public registers are becoming the new normal and there is no
sign at the moment of the tide turning. Trusts were once private arrangements
but it seems likely that this privacy will continue to be eroded.
The changes are significant. For those in the industry it is
worth reading chapter 9 of the consultation paper (see bit.ly/2J7MA47) and
considering responding to the consultation.
Jennifer Smithson, Macfarlanes
(jennifer.smithson@macfarlanes.com)
Home >Articles > Trusts and the Fifth Money Laundering Directive
Trusts and the Fifth Money Laundering Directive
Are trusts still private arrangements?
Transparency is the order of the day. We already have a
public register of people who own or control UK companies and in 2021 there
will be a public register of owners/controllers of non-UK companies which hold
UK real estate.
The government says this is all to do with combating money
laundering and terrorist financing. But it is also about making sure that
people pay their tax liabilities.
When it comes to transparency, trusts are no exception. The
EU already requires member states to maintain a central register of taxable
trusts. However, the government has released a consultation on the
implementation of the EU’s Fifth Money Laundering Directive which significantly
extends the transparency requirements for trusts.
All EU
trusts will have to be registered and not just those trusts which are taxable.
This could include, for example, trusts which just hold a life policy and are
therefore effectively dormant until somebody dies and may even include simple
joint ownership of real estate.
Some non-EU
trusts will have to register if they own UK real estate or engage advisers or
other service providers (such as banks or investment managers) in the UK.
The
information on the register will be available to anybody who has a ‘legitimate
interest’. This could include investigative journalists with a track record in
uncovering wrongdoing but only where they have some evidence to support their
suspicions.
If a
trust which is on the register owns more than 25% of a non-EU company, the
information about the trust will be accessible to any member of the public
whether or not they have a ‘legitimate interest’.
There is still some time to get ready for this. The new
rules will only apply from January 2020 and existing trusts will have until the
end of March 2021 to register.
Going forward however, new trusts will only have 30 days to
register and any changes to the registered information will need to be notified
to HMRC within 30 days of the change.
HMRC’s existing trust registration has been plagued with
technical difficulties. Let’s hope that these have been sorted out by the time
the new rules come into force.
At the moment, it is only EU member states who are required
to keep a trusts register. However, as can be seen, these changes will also
impact some non-EU trusts which have EU connections.
Public registers are becoming the new normal and there is no
sign at the moment of the tide turning. Trusts were once private arrangements
but it seems likely that this privacy will continue to be eroded.
The changes are significant. For those in the industry it is
worth reading chapter 9 of the consultation paper (see bit.ly/2J7MA47) and
considering responding to the consultation.
Jennifer Smithson, Macfarlanes
(jennifer.smithson@macfarlanes.com)
